In a move likely to be applauded by shareholder activists, the Securities and Exchange Commission has proposed amendments to the proxy rules that would require parties in a contested election to use universal proxy cards that would include the names of all board of director nominees. The proposal, approved on Oct. 26 by a 2-1 vote (with Commissioner Michael Piwowar dissenting), gives shareholders the ability to vote by proxy for their preferred combination of board candidates, similar to voting in person.

“The proposed changes would allow shareholders to vote by proxy in a manner that more closely replicates how they can vote in person at a shareholder meeting,” said SEC Chair Mary Jo White.  “This change would allow shareholders through the proxy process to more fully exercise their vote for the director nominees they prefer.”

The proposed rules would require proxy contestants to provide shareholders with a proxy card that includes the names of both management and dissident director nominees. The rules would apply to all non-exempt solicitations for contested elections other than those involving registered investment companies and business development companies. The proposed rules would aso require management and dissidents to provide each other with notice of the names of their nominees, establish a filing deadline and a minimum solicitation requirement for dissidents, and prescribe presentation and formatting requirements for universal proxy cards.

The proposed amendments twould also ensure that proxy cards specify the applicable shareholder voting options in all director elections and require that proxy statements disclose the effect of a shareholder’s election to withhold its vote.

The public comment period will remain open for 60 days following publication of the proposing release in the Federal Register. Compliance Week will have an in-depth look at the proposal in our Nov. 1 newsletter.